Posted on 12/11/2018 8:59:22 AM PST by SeekAndFind
The Wall Street Journal reports that speculation on housing by house-flippers is down, and the writers seem to treat that as a bad sign for housing.
Small-time investors who flooded into real estate in the past decade to take advantage of low borrowing costs and rising home values are starting to cut back. The moves indicate that the market's short-term risk-takers see limited upside – and possible turbulence – ahead.
I believe that it is actually an excellent thing when speculative bubbles get gradually deflated. If the speculative bubbles deflate naturally and gradually, there is much less risk of a recession or worse. The more speculators who get into the market for anything, the worse it is for the public who would like to buy a house without chasing the market.
Whenever prices of anything go up faster than incomes, the risk increases of collapse. That is what caused the economic collapse in 2008. What is happening in San Francisco is terrible for the long-term economic health of the city.
When you price the lower-, middle-, and upper-middle-income people out of the market, eventually, there will be huge problems, which will not be solved by government aid or a higher minimum wage. Every large city needs people working all sorts of jobs that are not paid like the high-tech companies, and the farther they have to move away to get affordable housing, the bigger the problem will eventually become and the more likely it is that people will move to more affordable areas..
It is also good that the FAANG (Facebook, Apple, Amazon, Netflix, Google) stocks are coming down to more reasonable prices. The Price/Earnings (P/E) ratio is getting closer to reality for a lot of stocks that got ahead of themselves.
(Excerpt) Read more at americanthinker.com ...
Oh, they did flip the House.
THIS !
After the last collapse, my brother in law in Phoenix walked away from a bunch of houses.
We’ve been down this road before. It will almost certainly be even uglier this time. My old house in Seattle went from $320k to around $520k and back to around $270k in the last bubble and bust. Right now zillo has it at $1.3 million, which is ridiculous. It was worth about $35k when it was new.
My bet it has to do with property taxes.
In my neck of the woods folks could afford the remodel, but not the accompanying exponential prop tax hike. Bet it’s the same deal for a lot of folks who were flippers
Flippers can’t find buyers dumb enough to assume that prop tax burden...
The most important indicator for him:
Whenever a new development was built in his city, he'd make some inquiries and see who was buying these properties. The tipping point for him was when a new luxury condominium tower was built ... and every unit was sold before construction began ... and he found out that only THREE of the 80+ units were sold to people who intended to live there.
Here, the property appraisal for taxes goes up, up, up. It never went down during the housing bust. Doesn’t matter that it’s falling down around us.
My brother was an active flipper. He doesn’t do it now because nothing is available to buy at anything near a reasonable price. And now that the economy is so good the regular contractors went back to working on new houses instead of trying to rehab old junk.
A friend of mine lives in a modest area of Sunnyvale. It’s a Mexican American area, and his family has lived there since the 70s, in a tiny, basic, unrenovated 2 BR, 1 BA bungalow that cost about $30,000 at the time. It’s now worth well over $1 million.
So yes, things are way overpriced, way beyond their actual value, and that can’t last forever.
Houses sell, but not as spec properties; and yes, prices will go down - and have to go down - to something realistic. People are moving out of California in droves because they can’t find housing. The same is true in New York City. Depending on an insane real estate market to fund your state or even your personal economy is not really a good plan.
How many Mexicans do you have to stuff into a 2 bedroom house to make the payments on a million dollar loan?
whats with the language?
Did you really call people ‘gooks’?
How about niggers? Or Polock or Wop or Dago?
would that be OK?
STOP IT
if $1.3 million is ridiculous then SELL SELL SELL
You can get a mansion in Buffalo, NY for half that- and retire on the rest and enjoy 4 seasons.
A $500B/year trade deficit. We trade real estate for cheaply made trinkets. I have a friend in CA, he said his street is being bought up by Chinese investors.
47.
Medium or stiff starch???
Note to self: This is never a good idea.
This reminds me of all the stories we heard a few years ago when states were selling off toll roads, and all of the buyers were foreign companies. There was plenty of whining and gnashing of teeth here on FR, with the predictable complaints that we were "selling the country to foreigners."
The lack of interest by American buyers should have been a huge warning sign to those foreign investors. They could have saved themselves a lot of trouble if they had paid more attention to "local sentiment" in the market ... because many of those roads were later sold off when the original buyers went bankrupt.
A lot of the house flipping boom was driven less by speculation than by rising gas prices that made long commutes more costly. Older suburbs and the urban core became more popular, which then resulted in the rehabilitation and flipping of older housing. That niche now seems to be exhausted, and newer and larger housing in the further suburbs has recovered its appeal as gas prices fell and incomes rose due to the recovery.
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